Brainsway Sees Partnership as FDA Backs Depression Device

By David Wainer -
Jan 21, 2013

Brainsway Ltd. (BRIN) expects to reach an
agreement this quarter for a medical-device company to market
its non-invasive system to treat depression in the U.S., Chief
Executive Officer Uzi Sofer said. The stock rose to the highest
in almost three years.

Discussions are under way for a deal that may lead to a
“large” upfront payment to Brainsway, he said. The company,
which is traded on the Tel Aviv Stock Exchange and has a market
value of 582 million shekels ($156 million), will seek a stock
listing on Nasdaq in the U.S. after the distribution agreement,
he said.

“We are in discussions with several large companies
interested in partnering with us,” Sofer said in an interview
at the company’s Jerusalem headquarters, where an assembly line
is set to churn out 20 devices a month. “Our next step is to
reach a deal with a distributor.”

Brainsway is counting on its Deep TMS System appealing to
psychiatrists and patients because it offers a way to treat
depression without surgery or pharmaceuticals that typically are
taken for life. Regulators in the U.S. and Canada this month
approved the product for use in patients who failed to respond
to antidepressants or can’t tolerate them.

Magnetic Pulses

Justin Ihle, a spokesman for Medtronic, said the company
isn’t pursuing a partnership with Brainsway. Rachel Ellingson, a
spokeswoman for St. Jude, didn’t immediately respond to a call
or e-mail seeking comment. J&J doesn’t comment on rumors or
speculation, Carol Goodrich, a spokeswoman, said in an e-mail.

In Brainsway’s system, a coil is placed against the
patient’s head to apply brief magnetic pulses to the brain, a
process known as transcranial magnetic stimulation. Patients are
treated five times a week for four weeks, with each session
lasting about 20 minutes, Sofer said. Whether further treatment
is needed would be decided by the patient’s doctor, he said. He
declined to discuss planned pricing for the system.

Neuronetics Inc. of Malvern, Pennsylvania, is the only
other company with U.S. Food and Drug Administration approval
for a non-invasive transcranial magnetic stimulation device. The
closely held company’s shareholders include Pfizer Inc. (PFE)

‘Deeper Structures’

Neuronetics’ product is approved only for patients who have
failed to improve after treatment with one antidepressant, while
the FDA allowed Brainsway to market its product for patients who
have failed with any number of drugs, or who can’t tolerate
medication, Sofer said. Brainsway’s product also goes deeper
into the brain, he said.

“The main breakthrough of the technology is that it’s
actually the first time you can, in a non-invasive way,
penetrate and influence deeper structures of the brain to
stimulate it,” Brainsway Chief Technology Officer Ronen Segal
said.

Cyberonics Inc. (CYBX) treats epilepsy and depression by
surgically implanting a device to deliver stimulation to the
vagus nerve, a pathway to the brain. The Houston-based company
has a $1.38 billion market value.

Brainsway’s product faces some obstacles, David Keiser, an
analyst at Northcoast Research Partners LLC in Cleveland, wrote
in a Jan. 11 report. “Treatment results with transcranial
magnetic stimulation are good, but not great,” he wrote.

Depression Market

In a clinical trial, 36.7 percent of patients showed a 50
percent or greater reduction in depression symptoms after
treatment with the Brainsway product. “However, it remains to
be seen how those results will hold up over time,” wrote
Keiser, who said Brainsway’s FDA approval was “not a concern”
for Cyberonics. He recommends buying Cyberonics shares.

About 15.5 million people reported struggling with bouts of
depression in the U.S. in 2010, according to a government
survey. The market for treating depression is tens of billions
of dollars a year, said Segal.

Brainsway rose 6.9 percent to 46.50 shekels in Tel Aviv,
its highest close since April 2010. The shares had soared 68
percent this year through yesterday after winning the regulatory
approvals. The company would join Israeli businesses from drug
developer Kamada Ltd. (KMDA) to Babylon Ltd. (BBYL), which markets translation
software, in seeking Nasdaq listings this year as trading in Tel
Aviv dwindles.

Analyst Coverage

A U.S. listing may boost Brainsway’s value by exposing it
to more investors and possibly attracting analyst coverage. No
analysts follow the company, according to data compiled by
Bloomberg.

“We are looking to be in the Nasdaq because this is the
right place to be,” said Sofer. “The reason is not so much to
raise money as it is to give the company its real valuation.”

Brainsway, which licensed the technology from the U.S.
National Institutes of Health, has European regulatory approval
to market the device for bipolar disorder and schizophrenia. The
company plans to try to expand the system’s use for as many as
25 brain disorders ranging from cocaine addiction to Alzheimer’s
disease, according to Brainsway.